Shurley: Bad Timing Doesn’t Bode Well for Southeast Cotton
Last month, North and South Carolina were pummeled by Hurricane Florence. Now, it appears to be Georgia, Florida and Alabama’s turn. As we publish this, Hurricane Michael has its sights set on the Florida Panhandle and southwest Georgia.
The projected path likely brings it ashore near Panama City as a Category 3 hurricane. Heavy rain and strong winds will impact cotton and peanuts as the storm moves inland across the Panhandle, then into southwest Georgia, and eventually give the Carolinas more trouble. Rainfall of mostly 4 to 10 inches, accompanied by tropical storm force winds, could impact large parts of the Florida panhandle, southeast Alabama, and southwest and central Georgia.
USDA will release its October production and supply and demand estimates on October 11. I pondered whether or not to even put this out now – why not wait? But the market is not likely to change its tune until events happen to clear up the uncertainties in this market and determine a more definitive path. The problems with cotton right now are not supply and demand and the numbers associated with all that. The problem is there are just way too many unknowns. Markets hate the unknown, and prices tend to get discounted when that happens.
The U.S. crop (until the October report), is estimated at 19.68 million bales – 440,000 bales larger than the August estimate. The Texas crop is still a big question mark, and, frankly, so is the Georgia crop even before Michael. Some really good yields have been reported, but boll rot and potassium deficiency are issues, and some of the crop (planted late, in June) still has a ways to go yet. One estimate is that 25% of the North Carolina crop was lost to Florence.
What the losses will be in Georgia is yet to be determined. Producers have been going all out to get as much of the crop in as possible before Michael hits. That will help. We thought we might have until Wednesday of this week, but rains moved and halted pickers. So now, we can only wait. As of Sunday, October 7, we were 88% open and 12% harvested – but more now.
Prices have taken a tumble. This market is being driven by uncertainties – the U.S. crop, the ongoing unresolved tariff situation, occasionally weak export reports, and few details yet on the new U.S.-Mexico-Canada (USMCA) trade agreement. It’s too much.
But, market fundamentals remain good and should eventually give prices a boost. Hopefully, most growers are already reasonably priced at this point. If so, I see no good reason to hit the panic button. Give this market a chance to build on its fundamentals.